rg-2. why rg-2? we don't know her name yet, but she's a winner just like rg3. we know that mother, father, son, and new baby girl are having the time of their lives they so richly deserve. mass mazel tov. i will see you tomorrow. slg . good evening, everyone. this is "the kudlow report." we are just hearing tonight about outrageous demands from democrats where a $1.6 trillion tax hike and get this, a $50 billion economic stimulus program. ? i thought this was about cutting spending, not raising it. republican leaders rejected these offers, no surprise. my two cents? republicans ought to stick to their guns on this one, stay with the low tax and spending

principles. the democrats are bluffing. when they talk about letting the tax cuts expire and bringing on a recession, i don't believe that bluff. president obama would become a herbert hoover with two recessions on his watch. he can't let that happen. obama did not be hoover. therefore the democrats cannot let all the tax cuts expire without a good deal. unfortunately the cliff talks have charities frightening. they're worried the deduction will be slashed. ivity a contrarian view about this that is going to surprise you on the charitable deductions. and if she wasn't already in enough hot water over the benghazi mess, there's a just breaking report out tonight u.n. ambassador susan rice has heavy jeismts in energy companies known for doing business with iran. and that is illegal. first up, breaking news on the fiscal cliff front tonight, president obama offered his opening bid in budget talks with

republicans, and we have eamon javers with all the details. good even, eamon. >> house republican aides are saying this was a new offer from temperature think geithner on capitol hill for a long series of meegts. there were varying report of whether or not he had made a specific new offer. in fact harry reid told me that he hadn't made a specific new offer. that said, republican sources are laying out the offer they say they got from the white house today. take a look at some of the specifics. you'll see what's prompting the reaction earp just talking about. they say what the white house is offering is 1.6 trillion in tax increases up front, to continue the payroll tax credit or a similar policy, what they call a permanent increase in the debt limits, a one-years extension of extended jobless benefits plan, and at least $50 billion in new spending. i talked to a house gop aide

that said this offers a complete break from reality. that said, i also talked to the white house. they said, in their view, the only thing standing between us and a deal right now is house republicans' intrance gens on tax cuts for the very rich. larry, what we are seeing is a high stakes poker game, a lot going on. as you say, one side or the other may be bluffing. i think they're bluffing, and eamon, thanks for the report. joining me to comment, "the washington post" columnist matt miller, cnbc contributor and former new hampshire senator judd gregg. town hall.com political director guy benson and catherine manuel ward managing editor for "reason" magazine. look, i'm all for a deal. i want a deal, i want to save the country, do all the right things. why should the republicans sign on to higher tax rates no

spending in run and something that matt miller never would have done, democrats want to actually spend more in a bill that's supposed to be about fiscal restraint. why should the gop sign on to that? >> they shouldn't and they won't. this is silly, no the a serious proposal. this is a first proposal where they're going for the moon, republicans should counter saying here's our counter-proposal, let's repeal obama care, enact the ryan plan and have their wish list. >> was it geithner or liu, the chief of staff? you're shaking your head to that. jack lew, the chief of staff, did a hell of a job. i am told he is the new geithner, that's why he's key to these talks. judd gregg, a former insider, probably more about the budget than any human living being, i don't know if that's good or bad, but i'm going to give you your shot.

>> i don't know where it came from, but i i'm it came directly out of the chief of staff's office working with the treasury secretary, something like this is so aggressive, almost like a labor union proposal in a negotiation. what i find disturbing about it, because i happen to think they should go to the simpson bowles template, first disturbing is the reversal of that ratio. >> and you're taking the revenue number up to 1 puff.6. the agreement of last summer was 800 billion, i think. when you go to 1.6, you're basically talking, even though the stated rate might have to go to 39 p 5%, you're talking actually about a rate of 42% when you throw in the rates

and -- and the medicare, you're talking a 45% top rate. >> and they want to cap some deductions on top of that. matt miller, you came from a fiscally conservative administration. >> that takes you to an effective rate in the low 42s. >> can i say calm down. it's an offer. >> you worked for alice arriven, and the clinton administration did a very good job -- that's me talking -- a very good job on this. matt, you know darn well this offer here is not serious by the democrats. >> i disagree, i'll tell you why. restores the clinton eera rates is not some catastrophe. it's a fair concern on the medicare thing. >> also doubling down when you include the deductibility.

why not go to where the speaker was? he said he was for revenue. why not take the speaker up on that? >> paul ryan's offer. this on one i'm. paul ryan's budget, passed by all the republicans, incurred trillions in debt because he kept taxes, he assumed it would stay at 19% of gdp and did nothing on the tax side at all. he was considered an intellectual hero. that's a joke. you know, this is the other side of the same thing. >> paul ryan is a good man. >> you need a paul ryan on your team. that's why i want you to go back -- you were very good. >> he's not a fiscal conservative. >> i am. >> god bless you. >> the best thing they do in proposal is try to kill the debt limit. we're the only country except for denmark. you can't have a debt limit being used to hold washington hostage anymore. >> that just takes more discipline away. catherine, i appeal to your

libertarian free market instincts. >> okay. >> are these gentlemen -- they're all very well-meaning here. we have a conservative. a conservative, a moderate democrat here, but are they all blowing smoke at us? do you see any real downsizing of the federal government? do you see us returning to the basic functions of what government should be that would stop us from going bankrupt? >> all due respect to this impressive -- pretty much everyone everywhere is blowing smoke. we're talking ridiculous opening offers. gladly give you a dollar tomorrow for a hamburger today. i would say there's absolutely no reason to think that spending cuts are going to happen, especially if they were not put into the absolute top line of a proposal that's happening today right now. the notion that somehow we'll

raise taxes and we'll get -- >> it's at manana. >> but you don't want the spending cuts soon. >> you'll get the sequester. >> here's where i disagree with my keynesian brethren. i believe lower spending is stimulative. i believe lower spendic -- >> how is that working out for britain? >> the trouble with britain is they raised their tax rate, which they then have to lower again. in fact the trouble will you all of europe is they are raising taxes the why is it that nobody understands that lower spending frees up the private sector to allow them to invest and create capital in jobs. would you explain that to me? >> i can't explain that. >> you can explain it to matt. >> i can ask another question that i think is important. here we are talking about tax rates. we are not talking about the spending side of which, this the president refuses to do.

i got a note that mitch mcdonnell burst out laughing when geithner went through his proposal. you know, we have absolutely no details whatsoever from the democrats ever on entitlements. they haven't put a budget out in the senate for 3 1/2 years, the president's budgets have gotten zero -- talk about a joke of a budget, how about the president's budget? >> but both parties are playing games. paul ryan presended up double the number of seniors and not a penny on new taxes. that's a fraud. they're wrong to say -- >> i want that paul ryan back. i want that paul ryan back. the guy who we ultimately -- >> you'll get 60 trillion in new debt. >> paul ryan is mr. debt. >> he is. he was a freeze numbers guy. >> he's just joshing you. he understands free market competition can work in health care just like it works in

everything else. >> frank lil if we're talking about, okay, it's not so bad to go back to clinton era tax rates, let's go back to the spending. nobody is putting even that on the table. we're talking about pretending if he cut a dollar anywhere, we'll have seniors dying in the streets. frankly i would like the old paul ryan to say talk to me seriously about spending, and i'll go along with the rest of the gop and talk about taxing. >> you tell me if i'm wrong. the republicans -- >> you never have been wrong. >> occasional i'm wrong, but i did save you from going into the administration right in this area, but anyway, you are who you are, and we're glad you're here. obama doesn't want another recession. the idea that pallety murray/chuck schumer idea if they can't have their way with no spending, if they can't have their way and raise tax rates they'll let all the tax cuts expire and we'll go into a

recession. i think that's a bluff. i think that makes obama herbert hoover obama. he can't take a second recession and it would blow him out of the water. i think that's why the republicans have more leverage than they think. >> that's absolutely true. >> you buy that? >> more importantly there are three other reasons you should be able to get to an agreement. speaker boehner nose knows we need an agreement. three, this is the rare period in american politics where you can have governance with less politics. number four, you have a forcing mechanism. that happens very rarely, so those -- all those factors come together. i believe one of these weekends the president and speaker will get in a room and desire this

things. >> we were there in the summer of 2011. we were there. i'm not saying it was i had k58, but the speaker and the president were very, very close. last question, judd gregg, why do you think it will work this time when it didn't work in the summer of 2011? >> this is the advantage of both sides to govern. we're note leading up to an election. >> it's better to do it after an election. >> people want the country to be governed. >> a real deal or establish another cliff? >> the first step will be very significant i think. the second step will be directions to the ways and means and finance committee on tax reform. >> this could be done without destroying the economy, but you are right. they have to do some serious spending cutting. hell, 20% of gdp is too high. 1% is where we ought to be. i got to get out of here. the producers are in my ears. many thanks to you all. we appreciate it very much. now the next question is,

will reducing the tax detux for charitable giving really hurt america's charities? you may be surprised about what i'm going to say about this, and the facts back me up. get ready for a debate, because free market capitalism is the best path to prosperity. people don't make charities just because of tax considerations. i'm larry kudlow. they have a heart, and that heart is what driving them to be beneficial. [ male announcer ] if you suffer from heartburn 2 or more days a week,

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the united way and other nonprofits are freaking out tonight that the charitable tax deduction might be capped in order to help soft the budget problem, but you know what i think? i think the deduction has nothing to do with charitable giving. it's a tax dodge for rich people. it deserves to be cut, capped, maybe even abolished. now, we are a great charitable nation, but it's not about taxes. it's about the moral responsibility to give back the bounty we have been blessed with, now about a deduction. let's talk. welcome to the show.

i'm sorry i'm going to be challenging all your assertions. you've been through this debate many times. i'm going to argue to you that it is income, wealth and economic growth that are the best drivers of prosperity from which charitable contributions stem. >> let me just respond to that, larry. there's no doubt in a americans are have generous, they will give, and their only sol encriminality erv is not the deduction, we agree, but no doubt and our studies show if you cap the charitable deduction it will affect nonprofits. that amount equates to the amount of giving for some of our largest charitable orbization. so at united way we're very concerned about what this kind of cap could mean. nonprofits of not only serving the most vulnerable, we're also big employers in this country as

well and we're very concerned about any kind of cap affecting how giving goes in this country units that's what troubled me. you've had a lot of trouble down through the year with the united way, a lot of fraud, a lot of corruption. my pal lane chow, one of those guys was in jail before they passed away. it's like big business. lenny, i talked to some people today from the cato institute, they say charitable giving is always 2%, and they say furthermore, take the reagan years, the tax rate went way down. the valuable went way down, right? well, guess what, we had record-breaking charitable contributions. >> i think people will still give, but in an economic time

when we ask -- the argument from the democrats is we're asking them to pay a bit more. if they're going to still give, are they going to give things to people such as the united way, give away the furniture, the clothing, money, or do we want them to give something that will build self-per pet waiting money? give to people that are going to build charter schools, give to people who will invest in stem research? give to people who will bring jobs to communities that need it is it we had to give back to healing the economy not just money into band ace. yesterday, the united way does great work, but let's be honest, there's a lot of bureaucracy involved. that money goes to the bureaucracy. perhaps we trim down the bureaucracy in the money we're going to shift over gets visited into things that brings prosperity to more people throughout the nation. >> stacy stewart, again we did some research on this point. it turns out the biggest

recipients is religion and religious organization. i myself give as much as i can. we built a catholic church, for heaven's sake in connecticut. it's pretty rare these days to build churches, most people are tearing them down. my point is people bhor giving to religious operations are not doing it because of the charitable deduction. they are doing it from the heart. >> well, you've got to understand, the point that was -- those organization are -- let's be clear about where this money goes. it goes through organizations who serve vulnerable peeble. we have 46 million people in poverty, a number of people struggling, why does is it ever make sense to reduce the incentive to help those individuals? >> i want to help them. that's not the issue. the issue is how to help. i think what lenny is saying, if you have an economy that is

prospering and growing and creating wealth, then the people who have more resources to pony up for all these very, very good -- >> but larry, we don't have that economy. >> it isn't about -- i understand that, but my point to you, it isn't a rich person's tax deduction. the bill gateses of the world and warren buffetts are using in deduction to literally avoid and evade massive tax payments. they are doing that, and a lot of people are taking advantage of this thing in ways we never intended. >> that's the super-rich, but we also have to look at the middle class. if we're going to get more prospers, we need to make sure we are having money going through things that will allow more people to come in and contribute. it doesn't mean thee get less, just they won't write it off.

>> stays,stewart, i want to give you the last word, because i fear i interrupted you, and i didn't mean to. >> no, you didn't bankrupt me. the point that lenny made is very important. the notion that bill gates and warren buffett are the only kinds of people who benefit is simply not true. middle-income people who give out of their hearts are big giving that incentive. they also give to the extent they do, because there's -- we can't afford to live that itches i think giving from the heart is the right thing. i go through it, my wife goes through it, you and lenny go through it, but it's the upper, upper crust -- i'm not against rich people, for heche's sake, but i'm against these special deductions and hoopholes that really benefit a teeny tiny little group of people that

don't need the benefit. stacy, stewart, i thank you for coming on. lenny, great to see you again. a judge gives the green light for hostess to start its bankruptcy plan, including selling some iconic brands, but will buyers be lining up around the block for this bake sale? that's the question. two years ago, the people of bp made a commitment to the gulf. bp has paid over twenty-three billion dollars to help those affected and to cover cleanup costs. today, the beaches and gulf are open, and many areas are reporting

their best tourism seasons in years. and bp's also committed to america. we support nearly 250,000 jobs and invest more here than anywhere else. we're working to fuel america for generations to come. our commitment has never been stronger.

music is a universal language. but when i was in an accident... i was worried the health care system spoke a language all its own with unitedhealthcare, i got help that fit my life. information on my phone. connection to doctors who get where i'm from. and tools to estimate what my care may cost. so i never missed a beat. we're more than 78,000 people looking out for more than 70 million americans. that's health in numbers. unitedhealthcare. hostess has been given the go ahead to start liquidating. the question is, will there be

buyers to clear the shelves? kayla tausche joins us from white plains, new york with more. >> reporter: good evening, larry. at this court a bankruptcy judge approved the winddown and approved payouts to executives, but now the big question is who will line up to actually buy the assets? he heard from hostess's banker today who said there's 110 interested parties, 70 parties have signed nondisclosure agreements to crunch the numbers. he expects the brand could effect north of $1 billion. twinkies are not the highest-grossing product. doughnuts actually make more than three times what twinkies made, even cup makes more than twinkies. they've been pulling at the heartstrings as we watched the situation unfold. earl yes we heard from greg rayburn at an industry conference that the events that led to the demise are

unfortunately unfolding in washington. >> what you can't do and won't fix it is if you sit there for a year that seems to be happening in washington, to say you're right and i'm wrong. then you never solve the problem. >> reporter: the hope is that the twinkie history doesn't repeat itself here. >> many thanks. kayla, thank you. how about the gdp report today, it looked higher, but unfortunately, if you look inside the numbers you'll see a lot of weakness that may come up. i'm going to give you my take on the economy and the stock market and the fed, all just ahead. [ abdul-rashid ] i've been working since i was about 16.

you know, one job or the other. the moment i could access the retirement plan, i just became firm about it -- "i'm done. i'm out of here." you know, it's like it just hits you fast. you know, you start thinking about what's really important here.

♪ ♪

welcome back to "the kudlow report." in this half hour, already under fire for her response to the 9/11 benghazi attack, new controversy surrounding susan rice. we're going to take a look at breaking reports on her investment portfolio and the numerous corporate ties to iran, which is illegal. plus don't you kids deserve the kind of free market competition that will improve their schools and education? once again, the teachers' unions say no. we await word from a judge in a

key case on this very issue. but first up, we'll look at the economy, stocks and the federal reserve. a quick note on the economy, a 2.7% gdp revision today. it looks okay on the outside. stronger housing investment, i like that. decent corporate profits, i like that a lot. there was's big business inventory bulge. that will -- consumer spending weaker than many expected growing just 1.4%. finally most importantly and difficult, business investment fell. equipment software fell, building structures fell, we've seen some lousy numbers on the durable goods and manufacture odds, it's a very bad sign that business is not in good shape. not in recession, but kind of this 1.5 to 2% thing that's driving me crazy. let's turn to the fed a

front-page "wall street journal" story suggests that maybe more fed stimulus may be coming. the question -- do we need it. here is lee hoskins. lee, welcome back. do we need more federal reserve stimulus? >> well, no, larry, we don't. how many times do we have to try this experience with qe 1, qe-2, qe-3. we still get a 2% economy. i don't want to be talking at qe-5 and we still have a 2% economy. all economies want to recover. what happens is we get bad government policy that can slow the rate or even abort it. we need to look at the policy instead of continually hammering asset purchases through the fed. i think there are great risks to the fed policy, and there are very little benefits. perhaps some cost. we're buying $40 billion of bonds per month, increasing the money supply. now they're talking for various

technical reasons to buy 45 billion more of u.s. treasury securities. that's 85 billion, that would be another $1 trillion in the american pump priming money supply after they've already done close to $2 trillion already. so we're at $3 trillion rising toward 3.5 trillion. here's my question. this stuff is not getting into middle america. like, to me, what the fed is doing is they're really helping the big new york wall street banks, helping them buy commodities, stocks, currencies, i don't see this pardon the phrase trickling down to main street community banks, small businesses. it's all sitting on reserve at these banks and the fed. it hasn't done a lick of good, lee hoskins. i agree. i don't see any reason why a bank or particularly a large bank at this point, a large banking institution, would want to step out and do some

aggressive wh the rules are, they bankers. they've been hammered by the regulators. as far as trickling down and getting money supply. it's not there. if the fed really wanted to help the economy, it would look more carefully at why the link with borrowing and spending by consumers has broken down. the assets -- the reserves are just sitting there, as you said. if the fed really wants to help the economy grow, they need to understand why that monetary base, the fed's balance sheet hasn't been translated into monetary growth. we're growing around 8%, but that size of balance sheet, if they focus more carefully on the problem between lender and borrowers, an the regulatory structure -- >> why is that a problem? is it a credit problem? is it a problem where people just have, you know, hidden

their heads in the sand? what's that? this is the first time probably since the '30s, lee, that the central bank has pumped in all this money and it hasn't work. as you say, if it was going to work, it would have worked. it's not been changed by the most dramatic increase probably in our history, and a rad cam change in the center bank. it hasn't worked. why hasn't it worked? >> well, because what they did essentially was pump up their own balance sheet, which you know we call high-powered money. the next step to translate that high-powered money into the money of the pockets of borrowers and lenders is to start making borrowers and lenders have an opportunity to do it. the reason that borrowers and lenders can't do it is banks have been battered, beat up, uncertain about the regulatory structure they're going to be facing. they're getting conflicting information from the regulators. if you're a bank, why would you step out and aggressively lend

which you're not sure you're going to be hammered by it. >> still a reg la story crunch. we're fighting the battle of 2008, which by the way came from mortgages, which nobody is making anyway. i think this is insanity. i know john hilsenrath is a great reporter. i think the problem is -- many thanks, lee, for helping us out. here's a thought experiment. what if i told you there would be no fiscal cliff recession? what if you believe me? how would you invest? well, we're going to give stephanie that challenge. she's director of research of "the street" and co-portfolio manager of jim crepers's charitable truth. an old friend. i'm here to say obama is bluffing, there's not going to be a fiscal cliff, they will do something to stop the taxes from expiring. he doesn't want to be herbert

hoover obama. i'm putting that on the table. if you take that off the table, you look at the economy, profits, the stuff, there's no lending going on, what is your outlook for the stock market? ivities i think we would be higher if we didn't have this issue. we have low interest rates, not only here, but globally the monetary policy will stay easy. whether you like it or not, it's going to stay easy for a long time. >> i would argue that it's helped. i would look at the gdp revisions and take the over side. a number of companies said they weren't spending at all and if they were getting push-outs from their customers because of fiscal cliff. >> i'm saying we reported there's a contraction. that could be good for stocks. >> if you get a resolution, then you get past that and businessless start to spend again. then the 2.7% gdp number, maybe

it's higher than that. if we could get off the backs of businesses, we would get 5%, 6%, and it would go to -- >> but even with lower. >> i want to ask you this. the reason i want you to forget the fiscal cliff is the washington crowd will do something to stop all the tax quits from expiring. they're going to argue about the upper end. that's why there isn't going to be a fiscal cliff. you've got tax hikes next year from obama care, 3.8% tax hike on all the investments, and capital gains going up, different going up, inheritance tax. we're taxing or capital, taxes our seed corn. how you will that affect all this? >> that means you don't get to your gdp, but you have good things going on in housing.

if you look at the core logic numbers this past month, that's very encouraging. in the face of all this, we have four years highs in consumer confidence. to me there are pockets in the manufacturing sector that have siege a resurgence, construction, grid repair, a lot of these power energy management solutions, kind of making these more efficient, if you will. there are some areas that will do better next year. that's where you want to investivities let's put the fiscal cliff aside, because they are not going to let the tax cuts expire. i'm here, i've been in politics for a long time. they won't do it. where would you invest? you sound pretty optimistic. where would you invest? >> i would say this, this fiscal inclusiver cliff, you have to use the weakness to buy. you're not chasing the strength.

housing for sure, but i would also say go to where the companies reported in the third quarter, where did they deliver in the face of all this? who beat? >> where were they? >> starbucks, facebook, amazon, emare son electric, so there are several good companies doing goodening in the face of this. i'm not that crazy about special dividends. i would much rather see them invest in their business. >> so the techie companies, they're not going to do one-time dividends. what you're saying is don't chase that. >> yeah, you don't buy a stock because they're going to do the special dividends. >> would you by trying -- you mention emerson electric. >> we own that stock. we own caterpillar. we do own in eaton corp, they bought cooper, which is all about the grid. they just bought something

they'll have 60% of their risens tied in new york america, where the growth is. >> so you're a bull. >> no i'm very selective on where i'm buying. i'm not naive to say the market will go straight up from here. it's going to be very volatile. i think at this point you have to have your shopping list. >> buy in weakness? >> buy weakness. >> thank you stephanie, terrific stuff. susan rice taking plenty of heat for all her mistakes after the benghazi attack, but a just-released reports says she has numerous investments in companies illegally operating with iran. tough story, details are coming up next. [ female announcer ] if you care for someone with mild to moderate alzheimer's,

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thirty days of exelon patch free for your loved one. access to trained nurses for you. call 1-855-999-1399 or visit exelonpatchoffer2.com. late word on susan rice's investment portfolio. with these investments, how can she possibly go esht with iran? joining us by phone michael rubin. this is a disturbing story. i don't begrudge ms. rice a

successful investment strategy, i assume it's in a blind trust and she's not running it day to day, but these companies that are in here. royal dutch shell, norsk hydro, and bh bill i ton. what's your take on this, michael? >> it's a question about whether the investments are league or not but if the main purpose of the obama administration when it comes to iran policy is to generate unity and pressure on iran with the sanctioning regime so to avert the last resore. excusen rice will be in a different position to advocate when she's profiting from it. >> why do you think this hasn't come out before? lord knows if you remember years

ago how dib cheney, who actually was out of hall i burton for a while, but they always referred to his investments, if this was a republican, people would be going now. >> i've been to say, i was a pretty low-level official, i had something like $200 worth of british petroleum which i inhearted from my grandfather. this became an ethical issue, because i was working on the iran and iraq desk for $200, which i also didn't control. the fact she has six figures invested, she should know better. she is was a senior officials in the clinton administration that began sanctioning iran, including the extra-territorial sanctioning for european companies doing business there culminating in the iran/libya

sanctions act. dos reqs if she is dominated, this sort of thing will come up? >> i think it very much will come up. if i were john curry, whofuls wants that position, i would be taking a quick look at my portfolio as well. i think this will be a longer-lasting problem. there's lots of reasons to object to susan rise. reasons relating to her opposition to extra dieding osama bin laden from sudan when we could have gotten him, saving the lives of those kid in subsequent attacks. questions about the rwanda genocide, and the questions seem to keep mourchting. >> we appreciate the update. thank you. why is the teachers union in louisiana blocking school choice and competition that would give

the kids a better education? how typical. it's a court fight with national implications. free market choice in education, as well as every place else. that's up next. stay with us, please. two years ago, the people of bp made a commitment to the gulf.

bp has paid over twenty-three billion dollars to help those affected and to cover cleanup costs. today, the beaches and gulf are open, and many areas are reporting their best tourism seasons in years. and bp's also committed to america. we support nearly 250,000 jobs and invest more here than anywhere else. we're working to fuel america for generations to come. our commitment has never been stronger.

fast food forward, a group looking for wage increases and union recognition demonstrated at several new york fast-food

locations. [ chanting ] the workers and supporters are demanding $15 an hour, up from the minimum wage they say many fast-food workers earn. there it is, you can see it. switching gears. different subject, why is the teachers' union trying to stop school choice and competition? choice and competition that will give the kids a far better education? there they go again, now forcing a louisiana court decision. folks, this is a free market issue just like everything else. it will work in education if we let it. my next guest was at the courthouse in baton rouge yesterday. he helped governor bobby jindal craft the original voucher business that passed. here is kevin chavez and former washington, d.c. councilman. welcome, kevin. >> it's good to be on.

>> i am such a strong advocate the free markets. i do not understand why we don't allow much more school choice and, yes, vouchers to pay for it. >> well, i understand that. i'm a strong advocate for children. the fact is, larry, as we know, many traditional public schools just don't work for the kids. we're at a point where we need to fly the plane while we fix it. there's nothing wrong while we go through this long-term exercise, absolutely nothing wrong with letting innovation and create activity flewish. with some of the scholarships that are going yield, they're being turned on to something they never imagined. i was with a 14-year-old boy yesterday who said he couldn't sleep at night to the thought he may have to go back to his bad school. that just isn't right. >> that is not right. i hope the facts are right. 953 of the 1373 schools in

louisiana, 953 -- that's well over half of these schools, get rated c, d or e. that's incredibly bad. how can the teachers union supposed to be dedicated to education, how can they deny these kids the choice to go to a better school? >> that's the ultimate question. you're right in making that distinction. in the no about rank-and-file teachers. this is about the political arm. in louisiana they want a redo, because there was bipartisan support for this scholarship program. it was very successful in new orleans when governor jindal and several democrats in the legislature wanted to make it statewide. the union was appear opresident-electic. now they've got to court.

do you know during the course hearing, not once did any of the union witnesses or laws talk about the kids. it was all about the money, the benefits and the fact they want another legislative debate. >> the reason i notice that many of the teachers are good both my sisters in-law are teachers. my wife taught when she was much younger. not only are we not getting mea mark choice and competition, but this money issue, which seems to phony to me, there's a $3.6 billion dr $3.6 billion budget in louisiana, but only 22 million is being used by these vouchers. so obviously the state board has plenty of fiscal latitude to let these kids and their parents make the right choices. it's not a money issue. not at all. one of the arts is the voucher program is taking money from the local school districts. the fact is, larry, this year

the local school districts have more money than last year. that's a pretense. all they're trying to do is relitigate the issue and trying to find a way to stop choice. you know why? if you let those market forces flourish, you will force competition. you will force the school district to do what they should. fire bad teachers and reward the good ones. they just aren't doing that because of the seniority and some of the tenure rules. >> you're down there in baton rouge. how do you think this decision will go? what kind of judges are looking at this? >> i was sitting in the courtroom and was impressed with the gung's grasp of the issues and the constitution is clear both on the federal level and locally, and we have strong advocating on our side. but we're not going to stop fighting. last 15 seconds, did bobby jindal help school choice? >> he did, and so did many

democrats. >> that is wonderful, the bipartisan part. kevin, thank you, sir. we appreciate it very very much. >> thank you. that's it for this evening as show. thanks for watching. i'll say it one more time. free markets work. they work in grocery stores, in automobiles, they work in education if we only let them. free market capitalism, the best path to prosperity and learning for the kids. i'm kudlow. we'll be back tomorrow night. [ male announcer ] you are a business pro.

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